Robert Reich explains how the poor will pay for the gas crisis while the rich cashes in
Robert Reich, former United States Secretary of Labor, is explaining how the gas crisis may ultimately end up being a cost that poor American bear while wealthy Americans capitalize off of it.
In an analysis penned for The Guardian, Reich explained the breakdown of how the economic funnel will ultimately benefit the rich. "When I consider what’s happening in Ukraine, I say what the hell. It’s a small sacrifice," Reich wrote. "Yet guess who’s making no sacrifice at all – in fact, who’s reaping a giant windfall from this crisis?"
"Big oil has hit a gusher," Reich wrote. "Even before Vladimir Putin’s war, oil prices had begun to rise due to the recovery in global demand and tight inventories."
Although Americans were faced with difficulties paying for gas and electrical bills, oil campaigns were unaffected. In fact, they made record-breaking profits as a result of the surge.
"Last year, when Americans were already struggling to pay their heating bills and fill up their gas tanks, the biggest oil companies (Shell, Chevron, BP, and Exxon) posted profits totaling $75bn," he noted. "This year, courtesy of Putin, big oil is on the way to a far bigger bonanza."
Reich also highlighted the contradiction in Chevron CEO Michael Wirth's remarks back in September. "As Chevron’s top executive, Mike Wirth, said in September, 'We could afford to invest more' but 'the equity market is not sending a signal that says they think we ought to be doing that.'"
Reich went on to translate what Wirth's remarks meant. "Wall Street says the way to maximize profits is to limit supply and push up prices instead," Reich wrote. "So they’re buying back their own stock in order to give their stock prices even more of a boost. Last year they spent $38bn on stock buybacks – their biggest buyback spending spree since 2008. This year, thanks largely to Putin, the oil giants are planning to buy back at least $22bn more."
So, why is this happening? According to Reich, oil companies could make different financial choices but its easier and more profitable not to.
"Big oil companies could absorb the higher costs of crude oil. The reason they’re not is because they’re so big they don’t have to. They don’t worry about losing market share to competitors. So they’re passing on the higher costs to consumers in the form of higher prices, and pocketing record profits."